California’s Department of Financial Protection and Innovation (DFPI) issued a stark warning about seven novel crypto and AI scams. Through 2,668 complaints in 2024, officials identified fraudulent schemes previously unseen. These include fake Bitcoin mining investments, crypto gaming traps draining wallets, and job scams demanding crypto transfers.
Additionally, criminals stole private keys via fake airdrops, lured victims through WhatsApp groups, and promoted AI ventures with “guaranteed” high returns. Sham websites mimicking legitimate platforms also syphoned funds. “Verify domains and avoid recovery scams,” urged DFPI Commissioner KC Mohseni.
AI Market Boom Fuels Sophisticated Fraud
The AI sector’s explosive growth, reaching $638 billion market cap in 2024, has attracted scammers exploiting its hype. Fraudsters now deploy AI-driven investment bots and deepfake endorsements to appear credible. Crimeware-as-a-service (CaaS) surged, enabling amateur hackers to rent tools for phishing, ransomware, and wallet drains.
Cybercriminals increasingly target crypto users through these services, accelerating the spread of scams. Following this regulator stresses vigilance, as AI’s complexity makes fraud harder to detect.
State Agencies Shut Down 68 Scam Websites
California’s Department of Justice (DOJ) and DFPI dismantled 68 fraudulent crypto platforms in 2024, recovering $11.1 million combined. The DOJ alone terminated 42 sites tied to $6.5 million in losses, averaging $146,306 per victim. Meanwhile, the DFPI erased 26 domains, uncovering $4.6 million in stolen funds.
However, prosecuting international operators remains challenging. “Scammers often operate overseas, complicating arrests,” the DOJ stated March 10. Most fraudulent sites shared traits: promises of high returns, prize incentives, and no contact details.
Pig butchering and phishing dominate Crime Losses
Pig butchering scams are where fraudsters “fatten” victims with fake profits before vanishing. This has resulted in a cost to the crypto industry of $5.5 billion in 2024, per Cyvers. Over 200,000 cases drained wallets via fake trading platforms and romance scams.
CertiK’s 2024 report flagged crypto phishing as the top threat, with $1 billion stolen across 296 incidents. Fraudsters impersonate trusted brands, tricking users into sharing seed phrases. Notably, these schemes thrive on social media and malicious ads.
Red Flags: How to Spot Fraudulent Platforms
Regulators highlight recurring warning signs. Illegitimate sites often promise unrealistic returns, lack company details, or offer sign-up bonuses. Legitimate projects typically list on CoinMarketCap or CoinGecko.
Additionally, avoid platforms demanding crypto deposits for “job opportunities” or pressuring quick investments. Mohseni advises cross-checking domain registrations and avoiding unverified recovery services. “If an offer seems too good, it’s likely fake,” he warned.
Protecting Yourself in a High-Risk Landscape
Authorities recommend rigorous due diligence. Research companies, confirm licensing, and consult financial advisors before investing. Use hardware wallets for large crypto holdings and enable two-factor authentication.
Report suspicious activity to the DFPI or FBI’s Cyber Division. As scams evolve, education remains critical. “Awareness is the first line of defence,” Mohseni emphasised. With global cooperation, regulators aim to curb these threats but user caution is paramount.
